Trump-Kim Summit in Singapore

Upon the conclusion of 2017, we discussed the investment outlook for 2018. We agreed that the impact of geo-political risks were hard to predict and could be the source of an exogenous event that might move the capital markets.

Typically, the tone of such a conversation tends to focus on unforeseen and downside risks. However, thus far in 2018, the geo-political event of the year has been the summit between President Donald Trump and Chairman Kim Jong Un in Singapore, which arguably over the long-term could be a boon for economic activity in Northeast Asia.

Sitting in Singapore, we are still basking in the afterglow of what, at a headline level, could at least be considered a successful summit – the operative word being ‘successful’. I will not dare wade into detailed geo-political analysis thereby avoiding the temptation to wrap a definition around the word success in this context. However, I would like to share some thoughts, now that we have had time to reflect.

As a long-term resident in Singapore my perspective is that the country (my home) was a clear winner. The media’s bright lights usually shine on Singapore during the annually-held F1 race; however, global attention was elevated to a more serious level of scrutiny for the summit.

We suspect that Singapore’s leadership left an indelible and positive impression on the Chairman and his delegation of Singapore’s achievements, especially the implementation of a long-term strategy related to economic development and infrastructure.

China, because of political and geographic proximity, has a front-seat to any future economic re-construction in North Korea, particularly in fixed asset investment and build-out (e.g. infrastructure), and Singapore could have a key advisory role to play in public policy matters, such as urban design and planning.

Having consumed analysis subsequent to the summit, who knows what the next steps will be and whether they will fulfil the respective goals of North Korea, the United States and China. Much of the commentary focusses on the similarities between the joint statement signed by President Trump and Chairman Kim with previous declarations. So why is this time different?

With Trump’s emphasis on promoting bi-lateral relationships with other nations (while ditching a multilateral approach, e.g. abandoning participation in the Trans Pacific Partnership) we observe that both actors are accustomed to leading a family enterprise or are dynastic, and perhaps establishing a principal-to-principal relationship may lead to bi-lateral negotiations with the desired outcome of stability on the Korean peninsula – or, perhaps, not.

So why not? In reality, any future negotiations will be cleared with China (at least by the North Koreans). Whereas the past Chairman Kims would surreptitiously travel to China via train, the recent feted visit by Chairman Kim puts a punctuation mark on the fact that any bi-lateral meetings between North Korea and the United States that may ensue will only happen under the watchful eye and influence of China. In other words Chairman Kim provided a trip report to President Xi. Ultimately, will a stable Korean peninsula enable China to fulfil the desire to lead a Community of Common Destiny (the PRC’s current foreign policy ideology) and allow Trump to claim a win for his America First mantra? We shall have to wait and see.